North Yorkshire Fire and Rescue Service were called to The Star Inn at Harome, on Main Street in Harome, at around 10.15pm on Wednesday November 24.
Nine fire engines rushed to the scene as flames ripped through the thatched roof of the much-loved eatery.
Fortunately, everyone inside the restaurant had been safely evacuated by the time fire crews arrived at the scene.
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In its latest update at 10am, the fire service said the incident was being scaled down to three fire engines and that the remaining firefighters are damping down the site and continuing to remove roof thatch.
In a statement posted at around 4.20am on Twitter, The Star Inn at Harome said: "It’s been a long night so far ... I’m afraid we won’t be open for a while as we are reduced to ashes with The Star on fire and still burning, residents please call after 9 am."
North Yorkshire Fire and Rescue Service did not confirm the extent of the damage and said an investigation into the cause has been launched.
The Star Inn at Harome has held a Michelin star since 2002 under chef Andrew Pern's leadership, briefly losing it between 2011 and 2015. The restaurant is described as "oozing character with its low beamed ceilings" in the Michelin Guide.
Mr Pern also runs The Star Inn The Harbour in Whitby.
Earlier this year the Lion Inn at Blakey Ridge was also seriously damaged in an overnight fire.